How will Stamp Duty affect build-to-rent?

Following Friday’s implementation of the additional 3% stamp duty land tax charge on buy-to-let properties, the housing industry has expressed its concerns.

The industry is worried about the impact the additional tax will have on the build-to-rent sector, which at present has 40,000 new units in development.

Losses

Based on average rental yields for a 10-15 investment in build-to-rent, the British Property Federation (BPF) predicts the tax will amount to the equivalent of losing a year’s income. As a result, the BPF believes investors will be re-evaluating potential investments into the sector.

The build-to-rent sector has already gained £4bn in investment since the start of 2016, providing quality privately rented properties with affordable value. Despite hopes to the contrary, the Government imposed the additional 3% surcharge to institutional purchases in last month’s budget.

How will Stamp Duty affect build-to-rent?

‘Difficult to fathom’

Ian Fletcher, director of policy (real estate) at the British Property Federation, observed, ‘many institutional investors will find it difficult to fathom why something so good-adding to housing supply-is taxed so highly. Given that in many cases the tax will equate to a loss of a year’s worth on income, it is unsurprising that many investors are thinking twice about entering the sector.’[1]

‘As well as the direct financial impact, what we cannot also afford is for this to knock the sector’s confidence when there are so many units coming out of the ground and the potential for many more,’ Fletcher added.[1]

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